Managing Risk
Last updated
Last updated
Multiply positions are leveraged debt positions that can be liquidated if borrow rates exceed staking rates for an extended period, or in the case of JLP, if JLP drops too much in value relative to USD.
Due to a change in our LST oracle infrastructure, LST depegs can no longer cause liquidations for Multiply positions. Read more here:
The risk of a SOL Multiply position is indicated primarily by the Net APY.
If Net APY is below the LST APY, or completely negative, it means you are paying more interest than you are earning.
Should this become extremely severe, and remain negative for extended periods, positions can be pushed towards liquidation.
In each Multiply Vault, Kamino clearly shows the Net APY over time at various leverage levels. Historically, Net APYs are positive, and spikes in borrow rates are promptly flattened by market activity.
The risk of a JLP Multiply position is primarily indicated by two values:
Loan-to-value (LTV)
Liquidation Price
The LTV of your position expresses your debt as a percentage of your collateral. A higher LTV means a riskier position. If your LTV reaches the liquidation threshold (indicated by the "x% from liquidation sub-value"), your position is eligible for liquidation - at which point ~2% of your collateral can be liquidated
Liquidation price is the JLP Price at which your position will be eligible for liquidation. This means that, if JLP drops in value relative to USD, you position can be liquidated when it reaches this price.
Managing a multiply position is simple:
If you lower your leverage, your position is safer, and has a larger buffer to liquidation
If you increase your leverage, your position becomes riskier, and has less buffer to liquidation
Adjusting your position size (i.e. depositing/withdrawing) has little to no effect on the risk of your position
Increasing your leverage will move your position closer to liquidation. When you increase your leverage amount, you will see the following values increase:
Total Collateral
Total Debt
LTV Ratio
Liquidation Price
Multiplier
Net APY will then typically increase, though this may depend on the staking rate - borrow rate equation, as well as your position size.
When you decrease your leverage, the exact opposite will happen: your position becomes safer, and the following values will decrease:
Total Collateral
Total Debt
LTV Ratio
Liquidation Price
Multiplier
Net APY will then typically decrease, though this may vary depending on current rates and your position size.
